Primary Health Care
boss
Ed Bateman
has warned the federal government against further tinkering with pathology regulation, saying that political uncertainty has already proved a burden for the sector.

As the federal government prepares yet another review of the sector – this time into its earlier decision to open up the licensing system for blood collection centres – Dr Bateman said that ­deregulation had been “good for the community".

“The government introduced [deregulation in 2010] on the basis of increasing competition and greater availability for patients and I think it’s done exactly that," he told The Australian Financial Review. “I think it’s good for the community and . . . should be left as it is."

His comments are at odds with other health sector chiefs, who have blamed the deregulation of collection centres for driving up costs and ­hurting smaller players, thereby curbing competition.

Sonic Healthcare
chairman Peter Campbell last month said the idea that deregulation had created competition was “rubbish". In July 2010, the Labor government removed restrictions on the number of blood collection centres a provider could operate. The deregulation of collection centre licences ­created a race between operators to buy centres, with the number of centres swelling 20 per cent in the first fortnight alone.

Opening new collection centres massively increased costs for the sector but has failed to have a similar effect on volumes and profit margins.

The government’s formal review into the deregulation of pathology ­collection centres, announced last month, will analyse rents and impacts on competition. It is due to be completed in April.

Primary, the nation’s largest private medical centre operator and one of the biggest pathology providers, opened the most collection centres after deregulation, adding 560 sites as at June 30. Rival Sonic Healthcare has added 364 centres, while private ­equity-owned
Healthscope
added 322. The remaining industry players added 218 centres.

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While Sonic has welcomed the review, Dr Bateman is fed up with ­regulatory changes.

“The biggest hurdle facing the healthcare industry is uncertainty regarding the government and uncertainty about the economy," Dr Bateman said. “I think the economy is in a hard place. The community is an­xious about where they are heading, their debt and where their jobs are."

If the government’s pathology review resulted in resetting rent, it might unsettle Primary’s base of ­collection centres and retail agreements, while giving a potential cost advantage to competitors.

“Primary would take the view they paid market rates in deploying the collection centres, so anything that disturbs the environment in which they are operating after they have deployed the money would give an advantage to someone who is late to the process," said an analyst who did not wish to be named.

Sonic’s Mr Campbell recently estimated $100 million in rent had moved each year from pathology players to general practice due to deregulation.

But Dr Bateman said it was not all negative. “Clearly you can understand why a pathology provider would like an extra $25 million on their bottom line, but I think service is important,’’ he said. “I believe in competition and I think this also supports the doctors as well, because they can rent part of their practices. There are positives and not just negatives."

Dr Bateman has been a fierce critic of the federal government. In February he said that the decision to end health insurance subsidies for higher-income earners was a gimmick, and government healthcare policy had focused on cutting costs for the past four years. On Friday, he said he was eagerly awaiting next year’s election.

He also weighed in on the issue of women in the workplace, saying the appointment of Primary director Arlene Tansey was not tokenism. She is the only woman on the 10-member board.

Dr Bateman, who set up Primary in 1985, also quashed any idea of retiring soon: “I’m not really thinking of doing anything other than doing what I’m doing now. I’m physically well and seem to have my marbles."

Primary on Friday confirmed full- year guidance for earnings before interest, taxes, depreciation, and amortisation to be in the range of $370 million to $380 million, resulting in EPS growth of 20 per cent to 25 per cent. Primary shares have been under pressure this year, but gained 22 per cent since August, ending on Friday down 1¢ at $4 each.